Correlation Between DCB Bank and Kalpataru Projects

Can any of the company-specific risk be diversified away by investing in both DCB Bank and Kalpataru Projects at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DCB Bank and Kalpataru Projects into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DCB Bank Limited and Kalpataru Projects International, you can compare the effects of market volatilities on DCB Bank and Kalpataru Projects and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DCB Bank with a short position of Kalpataru Projects. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCB Bank and Kalpataru Projects.

Diversification Opportunities for DCB Bank and Kalpataru Projects

0.13

Correlation Coefficient

DCB Bank  Kalpataru Projects

Average diversification

The 3 months correlation between DCB and Kalpataru is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding DCB Bank Limited and Kalpataru Projects Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalpataru Projects and DCB Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DCB Bank Limited are associated (or correlated) with Kalpataru Projects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalpataru Projects has no effect on the direction of DCB Bank i.e., DCB Bank and Kalpataru Projects go up and down completely randomly.

Pair Corralation between DCB Bank and Kalpataru Projects

Assuming the 90 days trading horizon DCB Bank Limited is expected to under-perform the Kalpataru Projects. But the stock apears to be less risky and, when comparing its historical volatility, DCB Bank Limited is 1.22 times less risky than Kalpataru Projects. The stock trades about -0.26 of its potential returns per unit of risk. The Kalpataru Projects International is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  128,290  in Kalpataru Projects International on October 8, 2024 and sell it today you would lose (105.00) from holding Kalpataru Projects International or give up 0.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DCB Bank Limited  vs.  Kalpataru Projects Internation

DCB Bank Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DCB Bank Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, DCB Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kalpataru Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalpataru Projects International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kalpataru Projects is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DCB Bank and Kalpataru Projects

The main advantage of trading using opposite DCB Bank and Kalpataru Projects positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DCB Bank position performs unexpectedly, Kalpataru Projects can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kalpataru Projects will offset losses from the drop in Kalpataru Projects' long position.

The idea behind DCB Bank Limited and Kalpataru Projects International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.